Chapter 5 Final Exam Study Flashcards Preview

Which of the following is not one of the steps for recognizing revenue?

Estimate the total transaction price of the contract based on the sum of the stand-alone selling prices of the goods and services in the contract.

2

Which of the following is true about revenue recognition under ASU 2014-09?-The realization principle guides the ASU.-Construction contracts are typically broken into the various separate goods and services that are included in them for purposes of revenue recognition.-The time value of money is considered when estimating all transaction prices.-Collectibility of the receivable is considered when determining whether revenue can be recognized.

Collectibility of the receivable is considered when determining whether revenue can be recognized.

3

Which of the following is not one of the characteristics of a contract for purposes of revenue recognition?-Rights.-Reasonable profit margin.-Approval.-Commercial substance.

Reasonable profit margin.

4

Which of the following is an indicator that revenue for a service can be recognized over time?-The seller is enhancing an asset that the buyer controls as the service is performed.-The seller is providing continuous effort to the buyer.-The seller can estimate the percent of work completed.-The sales price is fixed and determinable.

The seller is enhancing an asset that the buyer controls as the service is performed.

5

Which of the following is not an indicator that revenue for a service can be recognized over time?-The customer owns the asset as the seller is constructing it.-The customer consumes the benefit of the seller's work as it performed.-The asset being constructed has no alternative use to the seller, and the seller has the right to payment for progress to date even if the customer cancels the contract.-The seller has significant experience with the customer and anticipates fulfillment of the contract.

The seller has significant experience with the customer and anticipates fulfillment of the contract.

6

Which of the following is consistent with goods and services being distinct for purposes of identifying separate performance obligations?-The seller regularly sells the good or service separately.-The buyer could use the good or service on its own.-The buyer could use the good or service in combination with goods or services the buyer could obtain elsewhere.-All of the above.

All of the above.

7

Which of the following is a separate performance obligation?-An extended warranty.-A prepayment.-A right of return.-An option for the customer to purchase additional products under the same terms enjoyed by other new customers.

An extended warranty.

8

Which of the following is not an indicator that control of a good has passed from the seller to the buyer?-Buyer has an unconditional obligation to pay.-Buyer has legal title.-Buyer has scheduled delivery.-Buyer has assumed the risk and rewards of ownership.

Buyer has scheduled delivery.

9

Which of the following is an acceptable way to estimate uncertain consideration?-Most likely amount to be received.-Minimum amount considered likely to be received.-Expected value of the amount to be received.-Most likely amount to be received and expected value of the amount to be received.

Most likely amount to be received and expected value of the amount to be received.

10

Lewis is selling a product with some of the transaction price depending on the outcome of a future event. There is a 75% chance that the event will result in $100,000 of consideration to Lewis, and a 25% chance that the event will result in $40,000 of consideration to Lewis. Which of the following is not an appropriate estimate of the amount of uncertain consideration for purposes of Lewis estimating the transaction price?

$70,000

11

Assume a prepayment is made six months in advance of delivery of a product. The seller is likely to do which of the following with respect to the time value of money over the life of the contract?-Recognize interest expense.-Recognize interest revenue.-Ignore the time value of money.-None of the above.

Ignore the time value of money.

12

Bad debts must be recognized as an:

Expense.

13

Allocation of the transaction price to performance obligations:

Is based on relative standalone selling prices.

14

Winchell wrote a contract that involves two performance obligations. Product A has a stand-alone selling price of $50, and product B has a stand-alone selling price of $100. The price for the combined product is $120. How much of the transaction price would be allocated to the performance obligation for delivering product A?

$40.

15

Winchell wrote a contract that involves two separate performance obligations. Winchell cannot estimate the stand-alone selling price of product A. Product B has a stand-alone selling price of $100. The price for the combined product is $120. How much of the transaction price would be allocated to the performance obligation for delivering product A?

$20.

16

Which of the following is not an indicator that the seller may need to constrain recognition of variable consideration?-Uncertainty will not resolve until far into the future.-Based on much experience with the customer, the seller anticipates a more-than-remote chance that the receivable will prove uncollectible.-The seller lacks experience selling similar products.-Uncertain amounts are susceptible to important factors beyond the seller’s control.Based on much experience with the customer, the seller anticipates a more-than-remote chance that the receivable will prove uncollectible.

Based on much experience with the customer, the seller anticipates a more-than-remote chance that the receivable will prove uncollectible.

17

For profitable long-term contracts, income is recognized in each year when revenue is recognized:

At a Point in Time Upon Contract Completion: No. Over Time According to Percentage of Completion: Yes.

18

When accounting for a long-term construction contract for which revenue is recognized over time according to the percentage of completion, gross profit is recognized in any year is debited to:

CIP

19

Under the realization principle, revenue is recognized as earned when there is reasonable certainty as to the collectibility of the asset to be received and:

The earnings process is virtually complete.

20

Under IFRS, revenue for the sale of goods is recognized when the seller has transferred to the buyer:

The risks and rewards of ownership.

21

When accounting for a long-term construction contract under IFRS, if the percentage-of-completion method is not appropriate, the seller should account for revenue using:

The cost recovery method.

22

When IFRS uses the cost recovery method to account for a long-term contract,

Revenue equal to costs are typically recognized early in the life of the contract.